Entries in Text Messaging
(2)

It turns out, Jawa used to be known as "Cylon LLC" and they have been running their text messaging scams for a very long time. In fact, the company has already been exposed and a very good news story covered their entire scam more than a year ago. Watch this:

So what did Cylon do after they got caught? They changed their name to Jawa and put together a network of other LLCs to continue the same scam. It was simply too profitable to give up.

Jawa's half-a-million dollar holiday party was covered by several web sites, including this article in Gawker media. The comments on this article are very insightful. Several of the commenters, after reviewing Jawa's web site, wondered about how they make money or about its legitimacy. One particular commenter, however, seems extremely insightful:

Whoever this todbodman guy is, he seems to have all the details. One thing in particular about his comment jumps out at me: "...they are billing something crazy like 2 in 10 cell phones in the US..." Wow! There are over 290 Million cell phones in the US. Just AT&T and Verizon alone have over 180 million customers. If todbodman's comment is accurate, and as many as 2 in 10 (20%) cell phones in the US have been scammed by Jawa and their complex network of paid text message fraud, the numbers could be staggering.

Lets calculate what the numbers would be for just 20% of AT&T and Verizon customers at the lower, $3.99 per scam amount:

180 Million x 20% x $3.99 = $143 Million!

Now lets calculate the numbers for the total cell phone population of the US at the higher $9.99 per scam amount:

290 Million x 20% x $9.99 = $579 Million!

That is no chump change. Remember, that a lot of their scams are also on a monthly recurring basis, so the numbers can add up quickly. Rumor has it that they are running this scam WORLD-WIDE!

Here is something crazy to consider: If a person steals a car valued at $1,000, they'll spend years in jail for "Grand Theft Auto." What do you get when you steal hundreds of millions of dollars, $3.99 to $9.99 at a time? So far, you get to build North America's Largest House and throw some lavish parties:

Regarding the Verizon lawsuit, Jawa is going on the offensive. In a recent Press Release, Jawa claims:

"We are outraged by today's District Court action that allows Verizon Wireless to continue to abuse its dominant market position and force out smaller competitors who provide valuable mobile content to customers. It is a blatant attempt to monopolize content. We will continue to aggressively fight for our rights and hope to resolve this matter quickly. JAWA employs more than 240 people, all of whom live in the Scottsdale, Arizona area. We take great pride in our work and want nothing more than to get back to delivering superior service to our customers."

Seriously?

People can say whatever they want. Laywers and PR agents can make their claims seem legitimate. They very well could get away with this elaborate scam. It's possible they could "settle" the lawsuit with Verizon. After all, Verizon (and other wireless operators) make money from Jawa and Jason Hope's scams (they keep a portion of the proceeds). All they need to do is show that they are taking action to try and prevent such scams from continuing. Verizon's lawsuit has already done that. As far as Verizon is concerned, they might think they are better off to settle for a nice one-time payment, which would allow Jawa and Jason Hope to keep most of their stolen wealth and continue operating in other regions of the world where consumer protection isn't so great.

It's time to do something. This scam could be the biggest ever in the state of Arizona and there isn't a single journalist covering the story yet. It's very unfortunate.

This post is a bit off topic, but I can't sit here watching the media's silence on this potentially incredibly large scam pulled by a local tech company, Jawa.

I first learned about Jawa at the Scottsdale "State of the City" address given by Mayor Jim Lane. In his speech, Jim highlighted two Scottsdale-based tech companies as an example of what is great about Scottsdale. He highlighted Axosoft and our work with AZ Disruptors and he also highlighted Jawa, a company that I had never heard of until that point.

During the speech, we learned that Jawa, a local tech company focused on mobile development, went from 50 employees to 250 in 2010. That's a 500% increase in employee count alone. Wow! I thought. How did I miss this incredibly awesome new tech company, which happens to be less than 1/2 mile from Axosoft's offices?

After the Mayor's address, I rushed up to Jason Hope, the founder and CEO of Jawa, to introduce myself and find out what Jawa does. Jason was very brief, seemed very uncomfortable to talk to me and he gave me a quick line that "we're in the mobile apps business" and rushed off. I thought to myself, "that was weird."

So when I got back to my office, I went to Jawa.com to find out what Jawa does. Unfortunately, except for a couple of Facebook games that were supposedly in beta, I couldn't find much on their web site. I couldn't figure out how Jawa made money. There was lots of information about supposed charity work and philanthropy, but nothing about how to buy something from them. It didn't add up, but I figured I must be missing something and didn't think about it again.

Then, just last week, I saw this article in Network World about how Verizon is suing Jason Hope plus 5 of his associates and a network of more than 20 different LLCs that they have setup to run a fraudulent text message business. WHAT!?!?!

Verizon Wireless claims (from the lawsuit file):

Those are some amazing accusations. So how does Verizon say Jawa did it?

You see, to ensure that you don't get unwanted SPAM and false charges through text messages, the wireless industry has created "Consumer Best Practices Guidelines for Cross Carrier Mobile Content Services" and an organization called "Mobile Marketing Association" (affectionately known as the MMA). This is a good thing. It's the reason you don't get penis enlargement offers, Viagra offers or any letters from your cousins in Nigeria through text messages. To be compliant, an organization wanting to send text messages or charge cell phone users to send premium text messages, the organization must first apply for short codes. You know, those 5-digit numbers you always see on TV to vote for your favorite dance star.

Having friends that have gone through it, I hear the application process is actually very grueling and carriers like Verizon are extremely careful about who they let use their network to send text messages. To get approved, one must comply with a whole set of rules which prevent fraud. Verizon claims to bypass these rules, Jason Hope and his associates set up a network of different LLCs with addresses in different states to appear as completely independent entities. They would then apply for short codes by creating legitimate-looking web sites that seemed to be fully compliant with the MMA Best Practices. To be compliant, you would have to spell out the details of your terms, get double-opt in (with a confirmation text from the user) that they fully understand the charges they will receive.

Verizon claims that once a particular short code and the many associated marketing campaign were live and operational (there were over 120 of them known by Verizon) , they would then change their sites to be non-compliant to obtain cell phone numbers.

For example, if a person searched for the term "Great Quotes" on Bing.com, they might be presented with an ad claiming "Greatest Famous Quotes" like this (from the Verizon filing):

Clicking on the ad, the person would receive a web page that looked like this:

Notice how the entire site is "disabled" with the focus on the pop-up that asks for the user's cell phone number in order to access the quotes. What the user doesn't see here is that to get the "Greatest Famous Quotes" they will be charged $9.99 on their cell phone bill, every single month!

It gets even better. To make sure that they don't get caught, if anybody clicked on such ads from a known Verizon IP Address (such as Verizon's auditors who look for MMA Best Practice compliance), the same ad would redirect to somebody else's web site. In the example above, anybody hitting the ad from Verizon would be directed to:

Unbelievable stuff! Verizon claims they ran these campaigns for a ton of different commonly searched terms. "Food network recipe", "funniest jokes ever" and many others. Each resulting site would scam the user into thinking they are signing up for free text messages, not knowing they are really subscribing to a $9.99 monthly plan.

Because the scams are based on a monthly recurring charge, the charges can add up quick. If 1,000 people per day got scammed, that would add up to 30,000 people after 1 month, but the next month, another new set of 30,000 people might be added to the list. After a few years of this and it could add up to millions of dollars every month!

Who is Jason Hope?

Verizon's law suit claims that the mastermind behind the scams is Jason Hope, founder and CEO of Jawa. So who is this guy? A quick Google Search reveals a number of sites that talk about him, including:

Man, Jason Hope is one hella busy guy! With all his philanthropy work, giving, cures, science and space activities, how does he find time to run Jawa? That is some impressive amount of web sites talking about Jason Hope. What I love about these web sites is that they seem to all have similar content showing what an awesome, amazing guy Jason Hope is. Here is a sampling of the sites:

One thing is for sure. Jason Hope is one passionate dude!

He's not shy about spending money either. This article in the Arizona Foothills Magazine claims that Jason Hope is building a 100,000 sq ft house in Silverleaf, Scottsdale's most elite housing community, making his house the largest home in North America! Complete with indoor basketball court and a 3-story club.

For the Jawa Christmas party, this TMZ article claims that Jason Hope spent $500,000 to fill the place with stars. Remember, Jawa has only a couple of hundred employees. The article claims they spent $100,000 for Ludacris, another $17,500 on Snookie and others.

When I first met Jason Hope and heard about the success of Jawa, I couldn't wait to write an article about Jawa and Jason in the AZ Disruptors blog. I assumed that article would highlight the amazing path that he's taken to build a successful software startup. I assumed he would have tremendous insight and knowledge to share and help others get their companies started. Not for a second did I imagine that I would be writing an article that, if true, might be exposing Jason Hope and Jawa's elaborate scams. A part of me still hopes (no pun intended) that Verizon is wrong; that Jawa is legit; that Jason Hope is the good guy. But the cynical part of me has seen too many Enrons and Bernie Madoffs to think this is all just a misunderstanding.